Electricity hikes spark $8bn boom in renewables
Summary: Soaring electricity prices and a settled renewable energy target have attracted a record investment of $7.8 billion in new solar and wind projects as local and international firms rush to cash in and overcome years of underinvestment.....
But the spending boom has arrived too late for business and household electricity users on the east coast, with prices in NSW, the Australian Capital Territory and South Australia set to rise as much as 20 per cent a year from July.
Ahead of federal cabinet considering the recommendations of Chief Scientist Alan Finkel to guide new investment, companies have committed to, or are in the process of, developing new generation capacity able to take advantage of the high prices and increased market share that will come with the closure of coal-fired power.
Clean Energy Council chief executive Kane Thornton said the pace of new commitments had picked up in the past year and he could see commitments for new investment sufficient to meet the renewable energy target by the end of the year.
“It is really only in the past 6-12 months that there has been some policy and ... bipartisanship over the renewable energy target.
“As that new capacity comes on line and brings more supply to the market it will put downward pressure on prices,’’ he said.
CEC figures show 39 projects that are in the process of being built or have been completed this year will add 3712 megawatts of new generation capacity.
ITK Consulting principal David Leitch estimated recently that as much as 4942MW of new capacity was coming to market, including 1200MW of rooftop solar generation.
This compared with 1600MW of capacity withdrawn from the market last month by the closure of Victoria’s Hazelwood power station.
Mr Leitch said 2017-18 may be the last year in a run of steep electricity bill increases as rising investment and falling costs combine to drive down prices.
“It shows that the market is working,” Mr Leitch said.
“The cure for high prices is high prices.”
Electricity prices have doubled in the past five years as network charges, which make up as much as 50 per cent of the average household bill, and then wholesale electricity prices soared.
Wholesale prices had been hit by a lack of energy and greenhouse certainty that stalled investment in new generation capacity that would otherwise keep electricity prices low.
The closure of the Northern Power station in South Australia last year and the Hazelwood power station this year removed base load power generation from the market.
That combined with the Victorian government lifeline for the Portland aluminium smelter, which consumes up to 10 per cent of the state’s generating capacity to keep demand and prices high.
Electricity futures show prices are expected to fall from highs above $160/MW to below $100 in most states by early 2019, according to the Australian Energy Market Operator.
The latest round of price increases from AGL, Energy Australia and Origin Energy — which will cost the average small and medium-sized business nearly $1000 more — reflects their contracting to meet demand at current elevated prices.
Australian Energy Council chief executive Matthew Warren said the new volume from renewables was not able to meet large contracted supply because generators could not guarantee the power was available.
But Mr Warren said the volume of new capacity, combined with expectations that high gas prices would start to fall and a firm energy policy would emerge, had raised expectations that wholesale electricity prices would fall.
But he said the intermittency of renewable energy meant the price was likely to be volatile and that other measures such as alternative generation, storage and demand management would be needed.
Mr Lucas said renewable energy developers would soon need to see policy to guide investment beyond 2020, when Australia is expected to get 23 per cent of its electricity from renewable sources.